A Deficit Unassigned Fund Balance Was Reported in a City

question 41

Multiple Choice

A deficit unassigned fund balance was reported in a city Capital Projects Fund balance sheet. Which of the following explanations for the deficit is not plausible?

• A) The city financed a substantial portion of the project in the previous year.
• B) The city financed current year expenditures by issuing bond anticipation notes that are not general long-term liabilities.
• C) The city entered into a two-year construction contract. Transfers from the General Fund will be made each year to cover actual expenditures.
• D) The city had a large assigned fund balance.

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Definitions:

Equity Investments

Investments in the equity of other companies, representing ownership interests that offer potential dividends and capital gains.

Structured Entity

A specially designed entity created to fulfill specific business needs or purposes, often used in financial engineering or for investment purposes.

Control

The power to direct the financial and operating policies of an entity with an aim to gain economic benefits from its activities.

PSAB Standards

The Public Sector Accounting Board (PSAB) standards are guidelines for financial accounting and reporting in the public sector in Canada.